TMI Blog1996 (12) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... naging director of the company as well as the managing partner of the firm. The business of the firm as well as of the company was being carried on from the same premises and both the company and the firm were assessees under the Act. The firm filed its return of income on September 27, 1985, declaring a loss of Rs. 1,82,300. The assessment was completed on February 27, 1987, on a total income of Rs. 1,88,440 by the Income-tax Officer, A-Ward, Jorhat, after making, amongst others, disallowance and additions of income. An amount of Rs. 3,65,885 was disallowed by the Income-tax Officer under section 40A(3) of the Act being the payments made in cash exceeding Rs. 2,500 on various occasions to the said company against printing charges of the daily newspaper The Janambhumi. The identity of the payee and genuineness of payments had not been doubted by the Assessing Officer. Though it was admitted by the Assessing Officer that the payer and the payee was the same person, he did not accept the exceptional circumstances pointed out by the assessee, i.e., the payer and the payee was the same person, and that there was urgency and necessity for cash payment and thus there were special circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expression "exceptional circumstances". Learned counsel also submitted that the contention of the Revenue that the assessee could not justify the cash payments by pointing out the circumstances referred to in (1) and (2) above was factually incorrect. The assessee very clearly gave its explanations regarding the exceptional circumstances which were not dealt with in accordance with law. It was further contended that the Tribunal failed to act in accordance with law and misdirected itself in law while dealing with the expression "exceptional circumstances" ; no doubt the firm and the company were two different taxable entities. But then, the issue was not who was assessable for which income. The question was whether any practical businessman in the context of the facts found and recorded should hazard the risk of movement of cash for deposit in the bank and then again bring the cash from bank. The object of section 40A(3) read with the second proviso did not intend so. The demand of the Revenue was too rigid which would, according to learned counsel for the assessee, frustrate the object of section 40A(3) read with its second proviso and the Rules framed thereunder. Learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of income from profession or business, i.e., under sections 30 to 43A. Thus the provisions of section 40A were of overriding nature so specifically intended by the Legislature. The non obstante clause of the section very eloquently gave such interpretation. Mr. Joshi further submitted that the finding regarding existence of exceptional and unavoidable circumstances by the Tribunal was a question of fact and this court in exercise of the power under section 256(1) might not answer such question of fact. If the challenge was against the finding of the Tribunal on the basis that it was unjustified or perverse or not based on reasonably acceptable evidence, that could be the subject matter of a reference. and in the absence of such challenge the finding of such fact by the Tribunal was not open for any interpretation. In this connection references were made to the following two decisions : (1) P. C. Sharma and Sons v. CIT [1979] 116 ITR 758 (Cal) ; (2) CIT v. Bijoy Kumar Pandya [1993] 200 ITR 667 (Gauhati). On the other hand, Mr. Agarwalla disputed the same inasmuch as if the conclusion was arrived at by the Tribunal without looking to the relevant provisions of law, rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the facts of each case. In this connection reference can be made to Circular No. 220, dated May 31, 1977. In paragraph 4 of the said circular some of the circumstances have been mentioned. We quote paragraph 4 as under : "4. All the circumstances in which the conditions laid down in rule 6DD(j) would be applicable cannot be spelt out. However, some of them which would seem to meet the requirements of the said rule are : (i) The purchaser is new to the seller ; or (ii) The transactions are made at a place where either the purchaser or the seller does not have a bank account ; or (iii) The transactions and payments are made on a bank holiday ; or (iv) The seller is refusing to accept the payment by way of crossed and the purchaser's business interest would suffer due to non-availability of goods otherwise than from this particular seller ; or (v) The seller, acting as a commission agent, is required to pay cash in turn to persons from whom he has purchased the goods ; or (vi) Specific discount is given by the seller for payment to be made by way of cash." The circular itself indicates that these are not the only circumstances which can be said to be exceptional ..... X X X X Extracts X X X X X X X X Extracts X X X X
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